IRU reports European road freight rates hit new record

Date Added: 7 February 2022

IRU reports European road freight rates hit new record

As a major provider of European overland trailer services, Davies Turner notes that the the IRU, the World Road Transport Organisation, has reported that its European Road Freight Rate Benchmark for Q4 2021 shows that prices ended 2021 at historic highs across Europe, driven by a volatile mix of drivers over the year with supply chain congestion, supply shortages, cost increases and spiking demand from economic reopenings across the region. The potent mix of factors, which pushed the Benchmark to new record highs three times in 2021, shows few signs of unwinding in the immediate term.

The Q4 2021 European Road Freight Rate benchmark index stood at 108.3, 1.1 points higher than in Q3 2021 and 3.2 points higher than in Q4 2020, and the 6th consecutive quarter of rate increases across Europe

Rising fuel costs, up around 25% year on year in some major European markets, and the ongoing driver shortage have helped push up road freight costs and rates across Europe.

New data from the IRU shows driver 2021 shortages across Europe, including a shortage of up to 100,000 in the UK and over 60,000 in both Germany and Poland.

Freight rates are expected to remain high in Q1 2022 as demand stays strong, costs high and capacity constrained.

Breaking down the supply side of the equation, diesel prices, which account for one-third of total operating transport costs, have risen sharply, ending 2021 around 25% higher than at the start of the year in countries across the region including Spain, Germany and France. Driver costs have also risen due to driver shortages and the shortage of drivers is seriously disrupting supply chains in European countries as economies recover and demand for transport services increases.

On the demand side, with European economies recovering from Covid-19 rapidly and manufacturers working to get back up to capacity, aggregate European demand has risen sharply, helping to push aggregate road freight rates across the region higher.

Demand is, though, being held back by a mixture of supply constraints, bottlenecks and the uneven restrictions imposed by Covid-19 pandemic restrictions across the region. Heightened demand and restricted supply look set to remain over the coming months, likely insulating rates from a traditional Q1 dip from peak season levels.”

The latest benchmark report also tracked prices for cross-channel freight. Cross-channel lanes from France into the UK saw relatively subdued growth in 2021, growing 2.8% year-on-year in Q4. The backhaul lane for UK exporters has seen significantly higher development in rates, with a 12.8% spike in Q1 2021 levelling off to a 10.8% rise in Q4 compared to the same three months of 2020.

The volatile rate development on cross-channel lanes is primarily a result of delays and border checks related to Brexit and driver shortages in the UK causing a shift in capacity. The lanes were heavily impacted by Brexit legislation at the start of 2021 with research from the London School of Economics showing that UK businesses were impacted by delays, additional border checks and extra administration costs. Meanwhile the UK has the highest fuel costs in Europe at €1.75 per litre and the most acute driver shortage of up to 100,000 in 2021, pushing rates even higher.

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